Industry Week in Review – April 26, 2013

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U.S. Air Force Secretary Michael Donley announced that he will be stepping down on June 21.  Donley’s five years at the service were largely focused on overseeing the Air Force’s transition from operations in the Middle East towards a heavier presence in the Pacific, and were marked by his successful effort to enter the new long-range bomber as a program of record.  A number of defense industry executives have been floated as potential nominees to succeed Donley, including Sheila Cheston, Vice President and General Counsel at Northrop Grumman, and Deborah Lee James, Executive Vice President for Communications and Government Affairs at SAIC.  Cheston served as Air Force General Counsel from 1995 to 1998, while James served as Assistant Secretary of Defense for Reserve Affairs from 1993 to 1998.  Having served as a staffer on the House Armed Services Committee, James would also bring legislative branch experience, which could help strengthen the relationship between Congress and the Air Force.  In the meantime, Donley is working to fill vacant positions and prepare the organization for his successor, announcing recently that Bill LaPlante, a MITRE executive, will fill the role of Assistant Secretary for Acquisition and Management.

Big Movers

iRobot (up 16.4%) – shares were up for the week after the Company beat earnings expectations, reporting EPS of $0.29 versus analyst estimates of $0.18, and raised its full year 2013 guidance to EPS of $0.80 to $1.00.  The Company cited strong results from both its commercial and defense businesses, reporting a shift in revenue mix towards more product sales as contract revenue declined.

General Dynamics (up 9.4%) – shares were up for the week after the Company announced first quarter earnings, reporting EPS of $1.62 and beating consensus estimates of $1.53.  Revenue for the quarter was $7.6 billion, down 2.3% year-over-year.

Relevant Transactions

Honeywell to acquire RAE Systems, a manufacturer of fixed and portable gas and radiation detection systems, for $340 million, representing 13.0x 2013 EBITDA.  The acquisition augments Honeywell’s hazardous material and first responder capabilities and expands its distribution footprint, particularly in China.  RAE will be integrated into Honeywell Life Safety, a division of Honeywell Automation and Control Solutions.

TransDigm Group to acquire Aerosonic Corp., a provider of aircraft instrumentation such as digital altimeters and airspeed indicators, for $7.75 a share, or $39 million.  The acquisition augments TransDigm’s avionics portfolio, particularly in the aftermarket, where Aerosonic derives approximately 60% of its revenue.

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